Japan** downgraded its assessment of economic conditions on February 21 for the first time in three months amid recent signs of stagnant growth in private consumption and production. The analysis pointed out that due to the impact of factors such as continued pressure on consumer spending by inflation, Japan's domestic demand is insufficient, and the Bank of Japan may end its negative interest rate policy this year, and the vulnerability of the Japanese economy is further highlighted.
Inflation continues to weigh on consumer spending.
The monthly economic report released by the Japanese Cabinet Office on the 21st lowered the assessment of the economic situation for the first time in three months. Japan's economy is recovering modestly, despite what appears to be stagnating recently, the report said. The report notes that it is necessary to remain vigilant against the impact of factors such as aggressive interest rate hikes overseas, the conflict in the Middle East, and the Noto Peninsula ** that occurred in Japan at the beginning of the year.
Japan's Cabinet Office has been more cautious in its latest assessment of production conditions, citing recent safety monitoring scandals at companies such as Toyota, Daihatsu and Toyota Industries. The report maintained the assessment that the trend of business investment** in Japan was paused, noting that export growth has also stalled recently.
In addition, Japan's Cabinet Office downgraded its assessment of the state of personal consumption expenditures for the first time in two years. According to the report, the recent trend in personal consumption appears to have paused. In the case of everyday items***, consumers have cut back on spending, while warmer weather has limited the demand for winter clothing. Japan's Kyodo News Agency reported that this reflects the weakening of the service sector demand accumulated during the pandemic, which has previously supported the economy despite the rising cost of living.
Consumer spending accounts for more than half of Japan's gross domestic product (GDP). Inflation in Japan has eased in recent months, but remains at a high level, leaving consumers with little to see wage growth. According to Japan's Ministry of Internal Affairs and Communications, Japan's core consumption** index exceeded the central bank's 2% target for 21 consecutive months as of December last year.
Statistics recently released by the Ministry of Health, Labor and Welfare show that the real wage income of Japanese workers in 2023 will drop by 2 percent from the previous year5%, declining for the second year in a row. According to the survey results released by the Ministry of Internal Affairs and Communications, the average monthly real consumption expenditure of Japanese households in 2023 fell by 26%。
Reuters quoted Akiba Hiromichi, president of the Tokyo supermarket chain Akidai, as saying that the shopping habits of Japanese consumers are changing, and customers used to make a list when they came to shop, but now more customers decide what to buy after seeing what is cheap.
Japan's "Asahi Shimbun" previously reported that due to the cost of living, Japanese families have reduced their spending on food, such as choosing to buy chicken instead of beef.
According to a recent survey released by the Ministry of Internal Affairs of Japan, the average living expenses of households with more than two people in Japan were close to 30 in October last year20,000 yen, deducting ** fluctuation factors, decreased by 25%；The average cost of beef fell by 89%, which has been declining for 6 consecutive months.
Sluggish domestic demand has dragged down economic growth.
Economists believe that because Japan's inflation continues to expand, wage growth is not as fast as price increases, and household purchasing power continues to be suppressed, this is an important reason for Japan's sluggish domestic demand, and Japan's economic fundamentals can hardly be optimistic.
According to the preliminary statistics recently released by the Cabinet Office of Japan, Japan's real GDP fell by 01%, which translates to a decrease of 04%, two consecutive quarters of negative growth. This means that the Japanese economy is in a technical recession. Factors such as sluggish consumption led to a negative 0.0 contribution of domestic demand to economic growth in the fourth quarter of last year3 percentage points.
Kyodo News reported that in 2023, Japan's economy unexpectedly fell into recession, being overtaken by Germany, and changing from the world's third largest economy to the fourth largest economy, and the challenges ahead will be more severe than expected.
Japan's economic growth is likely to slow further. Nobuhide Kiuchi, an economist at the Nomura Research Institute, said that the outlook for the Japanese economy does not seem to be optimistic in the short term. Growth of 1. in 2023After 9%, economic growth will slow sharply to 0 this year3%。
The International Monetary Fund (IMF) expects India's economy to surpass Japan's in 2026 and become the world's third-largest economy in 2027. According to the Japan Center for Economic Research**, South Korea will surpass Japan in 2031 when measured by nominal GDP per capita.
Some analysts believe that Japan's long-term maintenance of ultra-loose monetary policy has led to distortions in the market mechanism, which is highlighted. For example, loose monetary policy has devalued the yen, helped unprofitable "zombie companies" stay afloat, and reduced the competitiveness of Japanese companies.
Due to poor economic fundamentals, many experts are worried about the current Japan. The "Nihon Keizai Shimbun" report pointed out that while Japan continues to live, the real economy is showing signs of stalling, and this "contrast" is obvious. JP Morgan *** strategist Takada Masei believes that the crazy influx of buying into Japan exceeds the economic fundamentals, and there is an overheating phenomenon.
Slow economic growth and a persistent decline in real wages have left the Bank of Japan with a difficult choice. Expectations for the Bank of Japan to end its negative interest rate policy are currently high. The market expects the Bank of Japan to announce the end of negative interest rates as early as March or April after the collective bargaining situation is determined this spring. The Bank of Japan has repeatedly emphasized wage growth and hopes to achieve stable inflation levels supported by domestic demand.
Japan's economic vulnerabilities continue to emerge.
Analysts point out that the fragility of the economy will be even more prominent, given that the Japanese economy may face its first interest rate hike since 2007 this year. The real challenge for the Japanese economy is how to reduce its over-reliance on monetary and fiscal stimulus. At the same time, with the rapid aging of Japan's population, the problem of labor shortage will become more obvious in the future, and how to tap the potential for economic growth will become a difficult problem in this context.
Some economists believe that Japan's potential economic growth rate is already below 1 percent. As the population is expected to grow from the current 1 in the coming yearsWith a sharp drop of 2.4 billion, the labor shortage will become more and more obvious, which has become one of the bottlenecks of economic growth. When there is a labor shortage, businesses tend to invest in automation and other labor-saving technologies while raising wages to ensure talent retention.
Japan** has pledged to do everything in its power to achieve stronger wage growth, promote labor market reforms, and boost potential economic growth by attracting investment in areas such as chips and low-carbon.
When efforts to increase productivity fail, reversing the economic decline will not be easy. Yuichi Kodama, chief economist at the Yasuda Research Institute of the Akeji Institute, said that investing in labor, digital and green transformation to ensure long-term growth is in the right direction.
There is also an argument that in order for the Japanese economy to grow, the two fastest-growing employment groups, women and the elderly, need to earn higher incomes. This will become possible as productivity increases. In economies with tight labor markets, boosting productivity requires investment in areas such as digitalization, and the Japanese economy, which has experienced years of expansionary policies, may not be ready for such a shift. (Reporter Wang Jing).
Editor-in-charge: Pure Gang.